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Productivity issues are being experienced in the UK construction industry

The Construction Corridor Could Lead to New Insurable Risks

Apr 2020

Productivity issues are being experienced in the UK construction industry, which faces a major challenge to not just increase output but also “level up” disparities in construction activities across the UK.[1]

The construction picture in the north of the country is very different from that in the south, with marked differences in employment opportunities, investment and quality of life. Now, the aim is to narrow productivity gaps, to create a more uniform construction sector, but with that could come new insurable risks.

Modern methods of construction (MMC) are seen as one route towards achieving regional construction work parity. This strategy revolves around creating off-site construction activities, which can be done at any location. Built elements can then be moved to sites across the country.

MMC underpins a vision of a “construction corridor” in the north of the UK, which would be a form of investment in areas in need of a boost, whilst also a means to create sustainable jobs. Mark Farmer, Chief Executive of the Cast Consultancy, has recently been charged with delivering the construction corridor, so things are likely to move on quickly.[2]

Another advantage of the construction corridor is that of relieving the skills shortage that exists in London and the South East, by removing some of the work pressures. Additionally, lower land and labour costs should benefit construction projects taking place in the North.

One issue, however, is that only 7% of contracting is currently handled in this off-site manner and any expertise in MMC is largely to be found in the south.

Creating such a step change in construction could have implications for contractors. With so little expertise in how to manage MMC projects, there is always the risk of accidents and incidents arising through lack of training and knowledge of how to run off-site construction.

If skilled workers have to be recruited from the south, to work on sites in the north, there could also be mental health issues to take into account if, for instance, workers are away from their families for significant periods of time or have long journeys to make, on a regular basis.

Knowing which insurance covers to buy could be difficult, with off-site risks being different in nature from on-site risks. Thorough risk assessments will be required at any MMC location of the future. Then there is the insurance that must protect the manufacturing location itself – the bricks and mortar risks such as fire and flood perils, vandalism and, potentially, also different types of business continuity risk.

What will most probably not change is the need for the same level of Professional Indemnity (PI) cover, protecting against claims such as allegations of negligence, design failures and poor advice. With PI cover hard to come by in the construction sector at present, and often more likely to be provided to an existing customer whose risk and track record is better appreciated, it will be interesting to see how PI insurers react to requests to cover MMC contractors and associated professionals.

One constant will be the need for construction sector contractors, architects, engineers and other professionals to work closely with an insurance broker who understands their type of work and who can offer the best advice on covering the risks faced. If you need to find a broker who understands the world of construction insurance right now, please use our ‘Find a Local Broker’ tool.